Great Minster House
33 Horseferry Road
0207 944 xxxx
5 August 2015
see list at end
Norwich Northern Distributor Road – Cost Increase
1. Whether to agree to provide additional funding (up to £15.8m) to Norfolk C.C. to
cover the increased cost of the Norwich Northern Distributor Road.
2. That you note the options at paragraph 7 and provide a steer on your preferred
3. Routine - however Norfolk cannot submit the final approval bid for the scheme
until they can confirm that all the funding is available and have asked for an early
response so as to keep up the momentum.
4. This submission has been cleared by Finance and Press Office.
5. Norwich Northern Distributor Route (NNDR) is a 20km dual carriageway road
planned to run from the A47 at Postwick, round Norwich, to the A1067 (see
Annex A for further background and also the attached map). Norfolk is now ready
to submit a final business case for approval but has asked for an additional
government contribution of £15.8m towards a £30m cost increase caused by
construction inflation and additional requirements placed on the scheme by
Natural England and the Environment Agency.
6. This would bring the Department’s total contribution (excluding Postwick
Junction) to £83.3m from the current £67.5m and the total cost from £87m to
£106m. Norfolk would pay half of the additional cost, increasing their contribution
to £35m. The remaining funding (£40m) is coming from district councils through
the Community Infrastructure Levy.
7. There are two main options for dealing with this request.
a) Stick to the long standing policy of not providing additional funding leaving
Norfolk to find the additional funding through:
additional local contributions;
advising Norfolk to seek the additional funding from the New Anglia
Local Enterprise Partnership; or
offering to provide advance payment of the various agreed formulaic
funding to be provided to Norfolk for maintenance and general
transport (IT Block and maintenance block);
b) Provide the extra funding or negotiate a smaller DfT contribution than £15.8
million - say £10 million.
8. The Government’s policy has for many years been that it will not provide
additional funding for such schemes from that agreed at programme entry. This
puts the emphasis on scheme promoters to manage their costs efficiently, to
reassign funds from local schemes to deal with cost increases, or to seek
additional funding from the Local Enterprise Partnership.
9. A change in policy would set a precedent which we would find difficult to argue
against in future. Scheme promoters for large schemes in the pipeline such as
the Leeds NGT (£250m) and the Lincoln Eastern Bypass (£89m) have factored
in the current policy to their funding profiles, but will almost certainly argue that
they should also benefit from any changes.
10. We have rejected similar claims for additional funding in the past. Examples
include E Sussex asking for an additional £30m for the Bexhill-Hastings scheme
and S. Yorkshire asking for c£6m for the Bus Rapid Transit scheme. The only
time this policy was relaxed was prior to the General Election when additional
funding was provided for the Croxley Rail Link scheme in Hertfordshire. This was
though a very exceptional scheme where costs rose by c£170m. The
Government agreed to pay an additional £34m from 2014/15 underspend but
even then the relevant Local Enterprise Partnership put in a considerable amount
of extra funding (£88m) by descoping some of their other schemes and Transport
for London agreed to provide £46m.
11. The Local Growth Fund system involves the devolution of funding and approval
for all but the few schemes which we have retained on the Department’s budget.
A core principle of the LGF system is that the consequences of cost increases or
delays to schemes should be dealt with by the LEP. Whilst Norfolk have argued
that their (the New Anglia) LEP will say this is a legacy scheme, it is still a
fundamental part of the region’s Strategic Economic Plan so the LEP should be
the first port of call for additional funding.
12. Norfolk has claimed that the costs are in part caused by delays, some of which
could be laid at Government’s door such as review of programmes following
elections (although this affected all schemes in the programme) as well as
changes to the planning system which changed the process by which schemes
such as this are dealt with. However, Norfolk signed up to this condition at
programme entry as did all other schemes.
13. Sticking to this policy may mean the scheme is not progressed, and we anticipate
concerted interest and correspondence from local MPs, but we would be
surprised if Norfolk did not find the necessary funding. They have options to
approach the LEP, make use of road maintenance funding, or to alter the scope
of the existing NNDR slightly by deferring the upgrade of a section to the west of
Norwich to a future scheme.
14. The scheme is high profile although there is significant local opposition. It is a
fundamental element of the local infrastructure needed to allow the significant
levels of housing and growth planned for the area. Norfolk is confident that the
project will remain within the ‘very high’ value for money category even with the
cost increase although we have not been able to verify this claim.
15. If you were to decide that we should provide additional funding we could seek to
reduce the amount provided by negotiating a smaller DfT contribution than £15.8
million - say £10 million. Although the LA majors funding has been allocated over
the next few years it is likely that we could find some or all of the required
additional funding from delays to other schemes. This would still leave a small
funding pressure for future years but one that is likely to be manageable.
16. The recent first quarter forecasting exercise undertaken by the Department has
also identified some emerging budget underspends and the balance to make up
to £10m could be found from these (with little or no impact into future years).
17. Alternatively, we have in the past dealt with similar funding problems by
advancing to an LA the funding they receive through the Integrated Transport
(ITB) and/or Maintenance Block allocations to cover the increased cost of
schemes. They would of course no longer have this funding to use for the
purposes it is provided - smaller improvements and highways maintenance. We
are currently paying Norfolk £4.141m annually over the next five years on ITB
and on maintenance we are paying the following amounts over the next three
years - £28.637m, £26.253m, and £25.459m. This would effectively be cost
neutral in the longer term as an advanced payment will be clawed back over the
next few years.
Presentation and Handling
18. Knowledge of the additional cost of the scheme is likely to become public in the
next week or two. Given the significant opposition to the scheme the Department
is likely to face calls to reject the additional cost with the hope that this will mean
the scheme does not continue. There will be claims that Norfolk is spending more
on roads at the same time as cutting expenditure on other areas such as social
services. There is a risk that the Government could be dragged into this
19. If we receive media queries in advance of any decision on the scheme itself we
would propose to say:
“We are currently considering an application from Norfolk County Council for
an increased DfT contribution towards the new Northern Distributor Road and
a decision will be made in due course.”
Analytical Assurance Statement
20. No new analysis has been carried out for this submission so it has not been
subject to analytical assurance. The scheme will be subject to detailed analysis if
and when the final bid is received.
1. Norwich Northern Distributor Route (NNDR) is a 20km dual carriageway road
planned to run from the A47 at Postwick, round Norwich, to the A1067.
Previously the Government gave initial approval, on cost grounds, for a shorter
14km section of the full route - from Postwick to A140. Norfolk plan to pay for the
scheme to be extended to the A1067.
2. The current transport network is claimed to inhibit current and future housing and
employment growth in Norwich. Norfolk estimate that up to 8,000 houses and
95ha of employment land (largely for office employment) leading to some 12,200
jobs will be unlikely to proceed without improved transport provision for which
NNDR (including the Postwick Junction) is deemed the best solution. In addition
current peak hour congestion on radial routes and the Norwich Outer Ring Road
leads to congestion and rat-running on inappropriate routes to the north of
Norwich causing environmental problems. Norfolk state that its ability to provide
further sustainable transport measures in the City, as set out in the wider
Norwich Area Transportation Strategy (NATS), is inhibited without the reduction
in traffic the road would bring about.
3. When last assessed the scheme had a very high vfm with a BCR of 5.4.
Programme Entry was re-confirmed in November 2011 at total cost of £111m of
which DfT would provide £86m subject to satisfactory completion of the
remaining statutory procedures and procurement. The Postwick Junction element
was subsequently separated out and approved as a stand-alone scheme given
the wider employment benefits it will bring even if the NNDR is not built. It is
currently under construction at a total cost of £24m with a DfT contribution of
£19m and is expected to open in October.
4. The Secretary of State approved the legal orders for the NNDR on 2 June and
they are now free of any objection period.
5. This scheme has been unfortunate given that its long development has meant it
has been caught by delays caused by reviews of policy on major schemes
following elections as well as changes to the planning system. Norfolk is arguing
that these policy changes were caused by Government so it should help cover
the additional cost. The project was originally given initial funding approval in
2009 but progress was delayed by the spending review announced in May 2010.
With conditional approval being re-confirmed in late 2011, this has added a 2
year project delay. Norfolk say that much of the additional cost is as a
consequence of significant construction inflation in the last 2 years, since they re-
set the scheme budget in 2013. They have sought independent advice on
construction inflation, and the increase is in line with that advice although it does
seem to be rather high.
6. The further work required by the Environment Agency and Natural England has
included archaeological investigation, environmental supervision, additional
fencing and access tracks, signing and lighting details as well as considering
higher specification bat gantry proposals increased landscaping provision,
additional construction constraints (more night working provision), changes to the
bridge structures and significant changes to the drainage design.